Planning For The End: Why Your Will Is Important by Matt Schwartz

 

Image used for Pay Taxes Later blog. Blog post written by Matt Schwartz

Why Have a Will?

Perhaps one of the most common answers to the above question is that a responsible adult should have a Will. However, the benefits of a Will go far beyond satisfying an internal sense of responsibility to your family and loved ones.

Some of the benefits of a Will are expected. Perhaps the most common benefits that come to mind are the opportunity to state who should be in charge of the distribution of your probate assets (it is important to remember that Wills do not govern the distribution of joint assets or assets such as retirement plans and life insurance that pass by beneficiary designation) and how should those assets be distributed to a beneficiary (outright or in trust). Beyond those common benefits are the opportunities to address subtleties such as which beneficiaries should pay the inheritance taxes due on the transfer of your assets. Should those taxes be paid by the residuary beneficiary even if assets are being distributed as specific bequests to friends whom will likely pay inheritance tax at a higher rate than the residuary beneficiary (that is at least commonly the case in Pennsylvania). Additional considerations include determining which assets should be distributed to which beneficiaries. For example, a Roth IRA should never be distributed to a charity and it is far better to use a traditional IRA or retirement plan to fund a charitable bequest than funding that charitable bequest with after-tax assets under a Will.

Preparing or Updating a Will Should Give You Peace of Mind

Despite the above stated positive benefits of a Will, I believe the best benefits of preparing a Will are organizing your affairs. The exercise of preparing a Will should force you to do a formal inventory of your assets and cause you to ask questions such as Am I on track for retirement?, Will my assets last for my lifetime?, How do I want to be remembered? Would my loved ones be able to continue my investment philosophy if I pass away? Could my loved ones find all of my important papers and, if they can, would they know whom to contact first to take care of the administration of my estate?
When we complete estate plans at our office, our goal is not nearly to document your wishes but rather to leave detailed instructions to leave your family prepared to handle the distribution of your assets and to give you peace of mind. Why go through the hassle of meeting with an attorney, sharing some of your most private thoughts and thinking about your mortality if you cannot have true peace of mind as an outcome?

Call me to discuss, revisit, or develop your Will at 412-521-2732 x211 or:

Contact Matt Schwartz, Attorney at the Lange Financial Group for Estate Planning needs including Wills.

Best wishes,

Matt Schwartz

Life Insurance: Is It Right for Your Estate Plan?

Insurance salesmen are often maligned and are frequently the butt of some pretty bad jokes. At the risk of being categorized with those poor men and women, I’ll tell you that I don’t hesitate to recommend life insurance to many of my own clients after evaluating their estate planning needs. Why? Because when it is appropriate and structured properly, life insurance has a number of benefits that make it an excellent and possibly the best wealth transfer strategy.

If you read the earlier chapters, you learned that legislative changes since 2009 mean that federal estate tax is an issue for far fewer taxpayers than in the past. The IRS wasn’t feeling guilty about charging estate tax on your assets, they just gave more people a reason to worry about a completely different problem called federal income tax. Chapter 12 of Retire Secure! delves into some techniques that show how life insurance can be used to help minimize the damage to the estate caused by income taxes at death. It also discusses how life insurance can be used to provide liquidity for a number of estate settlement needs, and also how it can be used to benefit the estate if there is a disabled beneficiary. While life insurance can be extremely beneficial it is important to remember that in situations where taxes and other estate needs aren’t a concern, the cost of the life insurance – especially for a senior citizen – might not be worth it.
Life Insurance, Retire Secure, James Lange

In earlier chapters, there are several references to the possibility that Congress may eliminate the benefits of the Stretch IRA. Chapter 12 introduces some new ideas regarding the inclusion of a Charitable Remainder Unitrust (CRUT) in certain estate plans. How do you think your children would react if you named a charitable trust as the sole beneficiary of your retirement plan? They might react very favorably when they find out that, in the long run, they could end up with a lot more money.

This is a very complicated estate planning technique that is not appropriate for everyone. Under the right set of circumstances, though, life insurance can be a very effective addition to an estate plan – especially if the owner of the IRA has always supported charities. Would you like to endow a chair at your local university or symphony orchestra, or perhaps provide financial support for your favorite hospital or religious organization long after your death? Read Chapter 12 to learn the basics of this strategy, and how life insurance can play a key role.

Stop back soon for an update on some really big news about the possible death of the Stretch IRA.

Jim

Jim Lange, Retirement and Estate Planning A nationally recognized IRA, Roth IRA conversion, and 401(k) expert, he is a regular speaker to both consumers and professional organizations. Jim is the creator of the Lange Cascading Beneficiary Plan™, a benchmark in retirement planning with the flexibility and control it offers the surviving spouse, and the founder of The Roth IRA Institute, created to train and educate financial advisors.

Jim’s strategies have been endorsed by The Wall Street Journal (33 times), Newsweek, Money Magazine, Smart Money, Reader’s Digest, Bottom Line, and Kiplinger’s. His articles have appeared in Bottom Line, Trusts and Estates Magazine, Financial Planning, The Tax Adviser, Journal of Retirement Planning, and The Pennsylvania Lawyer magazine.

Jim is the best-selling author of Retire Secure! (Wiley, 2006 and 2009), endorsed by Charles Schwab, Larry King, Ed Slott, Jane Bryant Quinn, Roger Ibbotson and The Roth Revolution, Pay Taxes Once and Never Again endorsed by Ed Slott, Natalie Choate and Bob Keebler.

If you’d like to be reminded as to when the book is coming out please fill out the form below.

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New Alternative to LTC Insurance

If you’re one of the millions of baby boomers approaching your golden years, you’ve probably given consideration to the purchase of LTC (long-term care) insurance. You may also be concerned that you’d be throwing your money away. It’s possible that you could pay a lot in premiums and never need the coverage.

Jim Lange has always felt that if a husband and wife had enough money to provide for both of their potential long-term care expenses, they were really just insuring their estate.  In that case, Jim would typically advise that life insurance was a more certain bet.

Now there’s an alternative to LTC insurance and that was the topic on the July 1st edition of The Lange Money Hour: Where Smart Money Talks. Guest Tom Hall of Capitas Financial/Pittsburgh Brokerage explained the ins-and-outs of a relatively new hybrid product that is essentially a life insurance policy with a long-term care rider.

It works like this — if you need long-term care, the insurance company will pay for your care.  The amount the insurance company pays you will be subtracted from your death benefit.  If you never need long-term care, your life insurance death benefit will remain the same.

All of this is acheived with a single premium that is significantly lower in cost than separate LTC and life insurance policies.  Plus, if you do need to tap into the long-term care coverage, you will be withdrawing the money income tax-free.  In this way, this hybrid policy becomes an effective estate planning tool.  You avoid the possibility of dipping into your retirement plans and paying taxes upon withdrawal.

Tom Hall pointed out that, just like any other policy, you can be turned down for this hybrid product.  However, it also works the other way.  Some people who don’t qualify for LTC coverage may qualify for life insurance with an LTC rider.

By the way, if you currently have a life insurance policy, you can’t just call your agent and add an LTC rider.  An entirely new policy needs to be put in place.

We’d also like to thank the listener who emailed the question asking what happens to your premiums if your insurance company goes bankrupt.  We’re glad she asked because it gave Tom the chance to explain that in Pennsylvania, if your insurance company fails, you are protected for up to $300,000.

Of course, this hybrid product isn’t for everyone — in some cases, straight LTC coverage might still be the better idea.  Each case needs to be evaluated on its own.  As always, the Lange team is happy to provide you with a thorough analysis — just contact the office toll-free at 800-387-1129.

Our Debut Show was a Big Success!

Thanks again to Ed Slott, ‘America’s IRA Expert,’ for taking the time to join us for the premiere of our radio show “The Lange Money Hour: Where Smart Money Talks” which aired on March 25th. Ed was a great guest and Jim and Ed ended up covering a lot of excellent tax-saving strategies. If you missed it, be sure to check out the audio that’s posted on retiresecure.com.

In their first appearance together, Jim and Ed explored how seniors can exploit the new law suspending required minimum distributions for 2009, Roth IRA conversion strategies for 2010, how to protect your IRA by using life insurance, planning for after-tax dollars inside a retirement plan after retirement and how to pick a good financial advisor. They even chatted about Bill Mazeroski and his 1960 ninth-inning, World Series-winning, home run against the New York Yankees (believe it or not, it’s a baseball analogy that relates to IRA investors today.) Come to think of it, it’s amazing that they were able to cover all of that in just one hour!

By the way, Ed Slott’s latest book Stay Rich For Life: Growing and Protecting Your Money in These Turbulent Times comes with a companion workbook that is very helpful. Jim was actually using it during the show!

Exciting news for the next show which is scheduled to air on Wednesday, April 8th from 7-8 p.m. ET on KQV 1410am. One of our Lange team members has agreed to join Jim to talk about taxes. Steve Kohman is a CPA, Certified Specialist in Estate Planning, Certified Valuation Analyst and a Resident Insurance Provider. He’s also an incredible “numbers-runner” – crunching the numbers to determine the best plan of action for you.

One week from the tax deadline, Jim and Steve will explain why it’s not too late to do something about your 2008 return. They’re happy to take your questions, so feel free to call the studio line at 412-333-9385.

Catch Jim and Steve on Wednesday, April 8th from 7-8 p.m. ET with a rebroadcast on Sunday, April 12th from 9-10 a.m. ET. Thanks to everyone who’s been listening around the country online at kqv.com. We’ve recently had listeners check in from Florida, Michigan, New Jersey, Ohio and Texas – we love hearing from you!

Keep listening!

Don’t forget that the audio to all of these shows is always posted on retiresecure.com.